Google Earnings Exceed Forecasts Easing Fears over Online Ad Market

The online search and advertising leader, Google, posted its third quarter results yesterday in a reminder of how Google Inc. has used its dominant position in the Internet realm to build a business that endures economic turbulences better than most other companies.

The online search and advertising leader, Google, posted its third quarter results yesterday in a reminder of how Google Inc. has used its dominant position in the Internet realm to build a business that endures economic turbulences better than most other companies.

Google’s quarterly sales and profit crushed Wall Street estimates as businesses shelled out more on ads to reach online consumers, showing yet again why the Internet search giant is far less vulnerable than most in the advertising industry. The vast majority of its revenue comes from advertising, chiefly search ads, which are more popular in a rough economy as businesses look to track the effectiveness of their ad dollars.

Google, which presented quarterly earnings that easily surpassed analysts’ expectations, reported that revenue climbed 33 percent and net income rose 26 percent. Although it does not typically break out revenue from different types of ads, it said mobile was on track to generate more than $2.5 billion in revenue in the coming year and grew 2.5 times in the last year.

[quote]“When I look back over the last quarter, the word that springs to mind is ‘gangbusters,’”  Larry Page, Google’s chief executive, said in a call with analysts after the earnings were announced. “It’s not bad for a 13-year-old,” he said, referring to Google’s age.[/quote]

“We are also seeing a huge positive revenue impact of mobile,” he said.

A darkening economic outlook — particularly in Europe, had stoked worries about advertising growth. But Google’s revenue and paid-clicks performance boded well for the fourth quarter, analysts said.

“These guys continue to show that they are not immune to the market but that they are going to perform better than traditional players,” Macquarie Research analyst Ben Schachter told Reuters.

Robust demand from advertisers in emerging markets, such as in Asia, as well as strength in its mobile and display advertising businesses, boosted Google’s financial results during the third quarter, he said.

Investors signaled approval, sending Google’s stock price up 6 percent. The stock climbed by $33.37 to reach $592.36 in extended trading after the release of results.

Nikesh Arora, Google’s chief business officer, said that its desktop business maintained momentum and that Google.com grew faster than a year ago. Google’s financial report also showed that desktop search advertising continued to chug along.

The statement provided some comfort to shareholders and analysts who have been concerned by Google’s charging ahead with aggressive hiring, new businesses and high-priced acquisitions, like its $12.5 billion bid for Motorola Mobility. On Thursday, Google said it hired 2,585 people in the third quarter, up from 1,526 new people in the same quarter a year ago, bringing its total to 31,353. The third quarter was its second-highest quarter ever for hiring recent college graduates.

[quote]I don’t love a lot of the things that Google’s doing, but their core business is a powerhouse, said Colin W. Gillis, an analyst at BGC Partners. “When they bust out revenues above expectations, all the sins are forgiven.”[/quote]

 

Source: Google Announces Third Quarter 2011 Financial Results